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How do I start an events company?

The special events industry has grown enormously in the past decade.

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According to recent research conducted by Dr. Joe Goldblatt, spending for special events worldwide is $500 billion annually. Goldblatt is the founder of International Special Events Society (ISES), the founding director of the Event Management Program at George Washington University, and co-author of The International Dictionary of Event Management.

“Suffice it to say, the marketplace is large enough to support and sustain your endeavour,” says Goldblatt. “If you’re working in one special events area, there are many directions in which you can expand. If you’re just entering the profession of special events, there’s a lucrative market awaiting you on many fronts.”

According to Goldblatt’s research, profits in this industry continue to rise. Just a few years ago, Goldblatt says, the average profit margin for an event planning entrepreneur was around 15%.

What Is Event Planning?

This question actually breaks down into two questions: What kinds of events are we talking about? And, what is event planning?
First things first. Generally speaking, special events occur for the following purposes:

  • Celebrations (fairs, parades, weddings, reunions, birthdays, anniversaries)
  • Education (conferences, meetings, seminars)
  • Promotions (product launches, political rallies, fashion shows)
  • Commemorations (memorials, civic events)

This list isn’t an exhaustive one, but as the examples illustrate, special events may be business related, purely social or somewhere in between.

Planners of an event may handle any or all of the following tasks related to that event:

  • Conducting research
  • Creating an event design
  • Finding a site
  • Arranging for food, decor and entertainment
  • Planning transportation to and from the event
  • Sending invitations to attendees
  • Arranging any necessary accommodations for attendees
  • Coordinating the activities of event personnel
  • Supervising at the site
  • Conducting evaluations of the event

How many of these activities your business engages in will depend on the size and type of a particular event, which will, in turn, depend on the specialisation you choose.

Why Do People Hire Event Planners?

This question has a simple answer: Individuals often find they lack the expertise and time to plan events themselves. Independent planners can step in and give these special events the attention they deserve.

Who Becomes An Event Planner?

Stephanie Moss of Stephanie Moss Solutions started out as an advertising and promotions manager for an IT company and became involved in the conferencing side of the business. She was drawn to the glitz and glamour of it all. In 1989, when she started her company, there were few event-focused agencies, and no one thought about booking their conferences through event managers.

Wedding planner Aleit Swanepoel took a circuitous route to the wedding industry, working in hospitality as a restaurant and conference centre manager at Oude Libertas, and then as the national functions and events manager for Distell, South Africa’s largest wine company.

This experience honed his organising skills. “I realised I was organising people’s weddings at the venues I worked at, free of charge really. In 2001 I must have coordinated in the region of 250 weddings,” he recalls. It was something he enjoyed and was exceptionally good at so starting his own business was a natural course to follow.

The Service Offering

What are the services that events planners offer their clients?

Here are the main tasks you’ll be completing as an event planner:
1. Research
The best way to reduce risk (whatever the kind) is to do your homework. For large events, research may mean making sure there’s a demand for the event by conducting surveys, interviews or focus group research. If you’re new to the event planning industry, research may instead mean finding out all you can about vendors and suppliers.

Research also may mean talking to other planners who have produced events similar to the one on which you’re working. Or you may find yourself reading up on issues of custom and etiquette, especially if you’re unfamiliar with a particular type of event.

Whatever kind of event you’re planning, research should include asking your client a lot of questions and writing down the answers. Interviewing a client may not be what you immediately think of as research. However, asking too few questions, or not listening adequately to a client’s answers, can compromise the success of the event you plan.

2. Design
Your creativity comes most into play in the design phase of event planning, during which you sketch out the overall “feel” and “look” of the event. This is the time to brainstorm, either by yourself or with your employees. It’s also the time to pull out and look through your idea file. (You do have one, don’t you? If not, read on and take notes.)

Don’t forget to consult your notebook for the client’s answers to the questions you asked in the research phase. These responses, especially the one regarding the event budget, will help you thoroughly check each idea for feasibility, preferably before suggesting it to the client.

3. Proposal
Once you’ve interviewed the client and done some preliminary brainstorming, you should have enough information to prepare a proposal. Be aware that the production of a proposal is time-consuming and potentially expensive, especially if you include photographs or sketches. While it’s a common practice in the US, South African companies seldom charge a consultation fee.

Panaretos says there are too many events management companies chasing the business for them to start charging for a consultation. “In many instances, you may be pitching to an existing client and charging a fee would really be inappropriate.” You may run the risk of having your ideas poached but, he says, that is part and parcel of the events business.

4. Organisation
During this decision-intensive phase, you’ll rent the site, hire vendors and take care of more details than you might believe possible. You’ll be on the phone until your ear is numb. But before you do any of this, make sure you have a contact person (either the client or someone acting on the client’s behalf) with whom you’ll discuss all major decisions.

Having a designated individual helps ensure that communication lines are kept open. Also, social events in particular sometimes suffer from the “too many cooks” syndrome. Having one designated contact helps you avoid being caught in the middle of disagreements between event participants. Generally speaking, the bigger the event, the more lead time that’s required to plan it. Major conventions are planned years in advance. Although you may not be arranging events on such a grand scale, you do need to allow at least a few months for events like corporate picnics, reunions or large parties.

5. Coordination
After you’ve made the initial plans, turn your attention to each of the activities that form a part of the overall event. At this point, your goal is to ensure that everyone is on the same wavelength. Good communication skills are important.

Make sure all vendors have at least a general idea of the overall event schedule. Even more important, vendors should be clear about what’s expected of them, and when. Vendor arrival times should appear in the contracts, but verify those times anyway. This is a “check and recheck” period. Make sure all your staff members know their roles.

6. Evaluation

The obvious, and in one sense the most important, test of an event’s success is customer satisfaction. The goal, of course, is to end up with a client who will sing your praises up and down the street, shouting it from rooftops. This is the client who will hire you again, and who will provide that famous word-of-mouth advertising for you.

There are several other ways to evaluate the success of an event. You can hire an event planning consultant; have someone who hosts extremely successful parties observe your event; plan a roundtable post-event discussion with your employees; obtain feedback from other industry professionals working at the event, like the caterer or bartender; or survey guests at or after the event.

7. Pricing
The goal in pricing a service is to mark up your labour and material costs sufficiently to cover overhead expenses and generate an acceptable profit. First-time business owners often fail because they unknowingly priced their services too low.

8. Market segment served
Social events have a different fee structure than corporate events. In the social events industry, planners typically receive a fee for their services, plus a percentage of some or all vendor fees.

The two income streams produce enough revenue for a profit. In the corporate events industry, however, planners typically charge a fee for their services, plus a handling charge for each item they contract. For example, a planner buys flowers from a florist, marks them up and charges that amount to the client. Another possibility is a flat fee, or “project fee,” often used when the event is large and the corporation wants to be given a “not to exceed” figure.

Training

How to become a certified event planner

Consider getting a diploma or certificate in event management. Another option is to choose a degree or diploma in marketing or public relations, both of which will give you a solid grounding to prepare you for a career in events.

  • Damelin offers a one-year Certificate in Conference, Exhibition and Event Management at campuses throughout the country.
  • Intec College has a one-year home-study Certificate in Events Coordination.
  • If you are interested in something more in-depth, consider the University of Johannesburg’s three-year National Diploma in Hospitality Management, which offers Event Management as an elective in year three.
  • One of the most exciting new courses available is the Cape Peninsula University of Technology’s three-year National Diploma in Event Management.

You may also consider working to achieve certification. In June 2008 the South African Qualifications authority (SAQA) registered two professional designations for marketers: National Certificate – Chartered Marketing (Level 7), known as Chartered Marketer (SA), and National Certificate – Marketing Practice (Level 5), known as Marketing Practitioner (SA), allowing individuals who are assessed as competent against the outcomes specified in each designation to put CM (SA) or MP (SA) after their name.

They are both also recognised by the European Marketing Confederation (EMC), giving international recognition across Europe, with Australia to follow. Services SETA, as the lead professional body for marketers, has arranged the development of processes through which this professional status can be conferred on individuals who can provide evidence of competence.

Getting to know your Market

What’s the best way to market an events company?

Events companies are most likely to grow their profile through their networks. Some event planners spend thousands of rand on big ads in business magazines and wait for the calls to roll in. Dr. Jeff Goldblatt says this is a mistake. Goldblatt advises new entrepreneurs in this industry to “stay away from the mass market.”

While a listing in the Yellow Pages may help potential clients find you, spending large amounts of money targeting the general public is usually not effective.

MD of SA events company Idea Lab, Peter Panaretos agrees. “The best marketing and advertising channel for anyone in this industry is Biz-Community. It’s the most recognised and the most read. However, events companies are most likely to grow their profile through their networks, via word-of-mouth, and as a result of the success of their last event. It’s that simple. When people know you, they trust you.”

Networking can help your business in two ways. If people have met you and know what services you offer, they may refer business to you or use your service themselves. Furthermore, networking with hotels, caterers and so on will give you a chance to meet some of the people whose services you may need as you plan events.

Although networking and word-of-mouth are the most common industry strategies for acquiring clients, traditional forms of advertising do have their uses. A distinctive card or brochure sent to a mailing list or to local businesses may attract new clients. A small ad in a local business magazine can help build name recognition. A website on the Internet may allow you to attract customers unresponsive to other forms of media.

Panaretos also advises BEE-accredited consultancies to visit the website of the Department of Trade and Industry. “The government is always putting out events to tender, and this can be an excellent source of business.”

Where to find clients for an event planning business

Broadly speaking, there are two markets for event planning services: corporate and social.

The Corporate Market

The term “corporate” includes not only companies but also charities and non-profit organisations. Charities and non-profit organisations host fundraisers, receptions and competitions, among other events, to expand their public support base and raise funds. Thousands of these events occur each year, and although the large ones require specialised event planning experience, you may find smaller local events to start out with.

Companies host trade shows, conferences, client and staff functions, product launches and meetings for board members or stockholders.

According to the United Nations World Tourism Organization, the global events industry is worth an estimated $743 billion annually, with an expected growth rate of 3.7% per annum between 2008 and 2017.

Exact statistics on what the South African events industry is worth are hard to come by, according to Kevin Kriedemann, editor of The Event. The most widely circulated claim is that the local industry is worth an estimated R20 billion.

However, the highest figure is from the Exhibition Association of Southern Africa, which claims that the exhibition industry alone generates R74.3 billion in direct expenditure. The lowest figure comes from the Department of Arts & Culture; its research shows that the industry turned over at least R5 billion during the period Jan 2004 to June 2005.

The Social Market

Social events include weddings, birthdays, anniversary parties, bar mitzvahs, Sweet 16 parties, children’s parties, reunions and so on. You may decide to handle all these events or just specialise in one or more of them.

The market for social events, especially birthdays and anniversaries, is expected to continue to increase over the next few years, as baby boomers mature. This group has children getting married, parents celebrating golden anniversaries, and their own silver wedding anniversaries to commemorate.

How much money will you need to start your event planning business? That will depend on the cost of living in the area your business serves and whether you work from home or rent office space.

It will also depend, to a lesser degree, on your own taste and lifestyle choices.

Keep in mind that while working from home will keep your costs low, you can’t start any but the smallest of event planning business on a shoestring. Peter Panaretos, MD of Randburg-based events company Idea Lab says that whether you choose to work from home or to set up plush offices depends on the type of clients you are chasing.

“There are low barriers to entry in this business as you can literally run an events company from your bedroom,” he says. “Because we sell intellectual capital and time, our clients do not pay much attention to our premises. What is more important for us is to have some form of working capital so that we do not need to secure deposits from clients. Waiting for a 50% upfront payment may cause you to lose a venue or a presenter, which can be very frustrating. Working capital definitely gives you some competitive advantage.”

Panaretos notes that his company leases seven storage facilities in which clients’ branding is kept. But there are other events management companies that outsource every aspect of the event and will therefore have no need for this type of space.”If you want to control more aspects of your business and offer elements for which you can bill extra, you will obviously provide more of these services in-house. At Idea Lab, for example, we offer advertising and design services as well as pure event management.”

Few, if any, event planners have 9-to-5 jobs. By its very nature, event planning tends to involve evenings, weekends, holidays and sometimes even specific seasons.

How much time you must commit to working will depend, once again, on the specialisation you choose.

As a general rule, social events involve more weekends and holidays than corporate events do. Some areas of the country and some types of events have “on” and “off” seasons. However, no matter what your specialisation (with the exception of parties for young children), you can count on working at least some evenings as you coordinate and supervise events. The planning of those events, however, will be done mostly during business hours.

How to calculate fees to charge clients for event planning services

If you’re just starting out in the industry, it’s reasonable to charge less for your planning services while you gain expertise.

How, you may ask, do you calculate fees for your services? Event planners such as Randburg-based Idea Lab price their fees-for-service (the total cost to the client) using a “cost-plus” method.

They contract out the labour; supplies and materials involved in producing an event and charge their clients a service fee of about 15% to 25% of the total cost of the event.”The actual percentage depends largely on how hungry you are to get the business,” says Peter Panaretos, MD of Idea Lab.

“Also, some clients want to see all the supplier invoices, while others will agree to your cost estimate and pay in accordance with that.”

How to start and run a recognised contest

The first port of call is researching your market, concept and viability. Here are a few guideines:

You will need to do some research:

  • Who the contest serves (ages, sex, other conditions for being contestants)
  • When and where the contest be held
  • What will your contestants gain from entering the contest (scholarship, prizes etc)
  • What will sponsors gain from the event (name recognition as a supporter, logos advertisement, etc?)
  • Decide on the amount needed for entry fees
  • You should have some experience related to these kinds of contests
  • For more guidance on assistance, visit the Research & Preparation section on this website

The First Steps

Trademark Registration

Beauty competitions around the world all have protected themselves and need a set of exclusive rights that apply to the contest. These rights can be licensed through registering a trademark. Registering a trademark is not mandatory.

Having a trademark notifies an individual that you own the idea. It allows you to take court action if someone else tries to infringe on your business. Protecting your intellectual property is done through the Company Intellectual Property Registration Office (Cipro) in Pretoria. You can also contact an attorney to assist you.

Legal Considerations

It is recommended that you seek legal advice to draw up terms and conditions for the contest. You need to cover yourself against indemnity and non-liability. This means that you are covered against loss or damage arising from acts or omissions on the part of the entrant, have the right to withdraw entries, or to reject any entry.

Terms and conditions include the fact that you can charge entry fees. You need to ensure that the entrants can prove their country of domicile (they are South African) and so on.

Speak to an expert

Before you go ahead speak to experts in the industry. You can contact Wendy Futcher who deals with the Miss SA beauty pageant by sending her an email. She will be able to provide you with more information.

Guidance on Writing Your Business Plan

Once this is done, you need to draft a business plan. For more information on how to write a comprehensive business plan, read Entrepreneur’s guide: How to Write a Business Plan: Step-by-Step Guide.

Where to find more info on starting an event planning company?

Books

  • Behind the Scenes at Special Events: Flowers, Props and Design by Lena Malouf
  • The Business of Event Planning: Behind-the-Scenes Secrets of Successful Special Events by Judy Allen
  • Dollars and Events: How to Succeed in the Special Events Business by J. Goldblatt and F. Supovitz
  • Events, Fundraising Galas, Conferences, Conventions, Incentives and Other Special Events by Judy Allen
  • The International Directory of Event Management by J. Goldblatt and K. S. Nelson
  • Special Events: 21st Century Global Event Management by J. Goldblatt

Books Specific to the SA market

  • Event Planning: The Ultimate Guide to Successful Meetings, Corporate Event Management: A Professional and Developmental Approach by D Tassiopoulos

Event Planning Software

Summit Event Manager Pro: www.summitsoftware.co.za

Associations

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

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Start-up Industry Specific

How Do I Start A Transport Or Logistics Business?

An all in one guide to starting a transport and logistics business.

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Thinking about starting a transport business?

Forecasts indicate that the demand for freight transport will grow in South Africa by between 200% and 250% over the 15 to 20 years.

Some corridors, (high volume transport routes that connect major centres), such as the corridors between Gauteng and Cape Town (which amount to 50% of all corridor transport) will increase even faster.

Your Free Cheat Sheet: Transport and Logistics Business Cheat Sheet

The scope in the transport and logistics industry is varied – from a one-man show using a small truck to transport goods and offer services, to a fleet of transport vehicles which travel the length and breadth of South Africa’s roads.

Road transportation includes commuter transport from taxis to bus transportation.

It can be a tough industry and there are many threats facing transport businesses but if you get it right, you can build a successful business.

What is covered in this guide:

  1. How to start your transport and logistics business
  2. How to get funding for your transport business
  3. What are the costs involved
  4. Finding customers and getting transport contracts
  5. Getting onto suppliers lists
  6. Buying trucks and employing drivers
  7. What are the regulations and risks
  8. Where to find guidance to start your business.

Ready to get going? Click the arrow button to learn how to start your own transport business.

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Want To Start A Property Business That Buys Property And Rents It Out?

Information on starting a property renting business.

Shawn Theunissen

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Start your property rental business using this guide

I would like to start a property business where I purchase the properties and I rent it out, I already have a paid up property that I am renting out but my taxes are too high on the rental income so I am considering starting up a business. Could you advise me on where I can get more information on the requirements to start this and provide some guidance on whether it would be wise to pursue this business?

Before starting any business, it’s important that you’re absolutely clear about why you’re doing it – and that it’s going to be something that excites you, drives you and challenges you in the long-term.

If you’re only considering starting a property investment and management company to try and reduce your taxable income, then I don’t believe this is an appropriate – or a sustainable – solution. You should rather consult a reputable financial adviser about other investment options that would better suit your personal needs.

If owning and managing properties is, however, an opportunity you would like to pursue, I would then recommend that you start off by equipping yourself with a proper understanding of what it actually means to be a landlord. This will help you to make an informed decision about whether or not you want to start this (ad)venture as an entrepreneur.

Related: How The Property Brothers Built Up A Real-Estate And Entertainment Empire One Brick At A Time

At a very basic level, here are some of the things you might want to consider to determine if this is the right business for you:

Initial cost

initial-cost-and-property

This is what you need to consider, cost wise, when you start up your business

You need to consider the initial cost that you will be incurring when setting up the business, especially since you have a property in your personal capacity.

You will need to transfer the property from your personal capacity into your business and pay transfer fees and transfer costs.

These costs will be calculated based on the current value of the property.

The work and planning

No matter whether you’re a residential or commercial landlord, property management requires a great deal of work and planning. Remember you will be responsible for all aspects of the property: From purchasing it to maintaining it on a day-to-day basis.

This involves everything from transfer to managing the monthly utility bills, all the way through to replacing the geyser when it bursts and ensuring your tenants behave appropriately in the building. You would also need to source your tenants and ensure that they pay you on time.

All by yourself

business-owner-development

Starting your business alone? You need to know this

From a start-up perspective, you would probably need to do all of this yourself in the beginning. As such, you would need to work to build up your own database of reputable suppliers: Plumbers, electricians and handymen. It’s important that you find experienced, qualified suppliers that you can trust, and who will be able to deliver on time and cost-effectively.

This can be a very time consuming process. Also consider that you would need to be on hand to facilitate all of this work: Arranging the call-out with the supplier and the tenant; overseeing the work delivered; paying the supplier etc.

Related: Handyman Joshua Cox Of Trade-Mark On Thinking Like A Tech Start-Up

Business owner development

Above and beyond that, you’re then going to need to develop yourself as a business owner. You will need to equip yourself with the skills and knowledge required to lead and manage this business in order to make it both sustainable and profitable. This will require a significant investment from you: Time, effort and money. The more you commit to this journey of personal and professional development, the better your chances of success.

If you can picture yourself doing – and enjoying – all of the above, it’s then equally important to consider if this is a viable opportunity.

The greatest barrier to entry in this sector for you as an entrepreneur is probably going to be finance. You need to be conscious of this from the outset.

  • Do you already have access to the funds you need to purchase the properties you are going to rent out?
  • If not, what are your plans to secure this funding? And what are the returns you are expecting?
  • Also consider the funding of the business itself. How will you finance this, especially during the first year?

My recommendation here is to take the time to do your homework – and the maths. While this could be a business opportunity, it might not be something that will be possible for you to do on your own.

Related: What You Need To Know To Become the Next Property Entrepreneur

If you have a feasible plan regarding the above, you then need to start working on developing a model for this business – as well as a strategy and plan. All of these will require research on your behalf: From reading Entrepreneur to accessing websites, possibly visiting walk-in centres etc.

This will include unpacking the actual opportunity itself – and determining if there really is a demand for your service offering.

Please note that the above are thinking or “trigger-points” – listed simply to give you an idea of some of the things you need to consider, as well as the mindset you will potentially need to adopt as an entrepreneur. Your response to them should give you a good sense of if this is the path you wish to walk.

Remember that entrepreneurship is a journey – and every day on this road is a learning opportunity. If it is for you, embrace it whole-heartedly, don’t be afraid of failure and be sure to seek out the assistance available to you.

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Start-up Industry Specific

How Do I Start A Child Services Business?

The ultimate guide to starting a child care or child services business.

Entrepreneur

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Is It for You?

Does children’s laughter sound like music to your ears? Do you enjoy the idea of six kids chaotically crawling at your feet at any given moment? Then read on for your perfect business.

The number of working parents – including single-parent families and families with both parents employed is climbing, creating an ever-growing need for quality child care. That need is creating a tremendous entrepreneurial opportunity for people who love children and want to build a business caring for them.

Related: Free sample business plans here

Child-care services range from small home-based operations to large commercial centers and can be started with a small investment.

You can stay very small, essentially just creating a job for yourself, or you can grow into a substantial enterprise with potentially millions of Rands a year in revenue.

You also have a tremendous amount of flexibility when it comes to the exact services you choose to offer. You may limit your clientele to children in certain age groups or tailor your operating hours to meet the needs of a particular market segment. You may or may not want to provide transportation between your center and the children’s homes and/or schools. You may want to take the children on field trips.

As an alternative to child care, you may want to consider a business that focuses solely on providing transportation for children. Of course, the basic work you’ll be doing − caring for someone else’s children − bears a tremendous amount of responsibility and requires a serious commitment. When the children are in your custody, you are responsible for their safety and well-being.

You will also play a key role in their overall development and may well be someone they’ll remember their entire lives.

Filling an important need

day-care-research

Starting an educational business in South Africa is always beneficial

One of the biggest challenges facing South African families today is caring for their children while the parents work. According to Stats SA 39% of women head households in South Africa. A higher percent than ever of married-couple families, both husband and wife work outside the home. The labor-force participation of women in their childbearing years continues to expand. As the number of working parents rises, so will the demand for child care.

Another issue that has an impact on child-care issues is the new, 24-hour global market. Occupations with a high number of employees working nights and weekends − such as janitorial, hospitality, customer service and technical support − are experiencing substantial growth, and workers in these fields find obtaining quality child care an even greater challenge than their 9-to-5 counterparts. For many working parents, there is no single solution to their child-care needs.

More than a third use more than one option, such as day-care centres part of the time or full time or use domestic staff to provide care for children who don’t attend a daycare centre.

Related: How to Choose a Business Name that Works

Do you have what it takes?

What are the characteristics of a person who would do well operating a child-care. The person needs to be energetic, business-minded, a competent leader, have a pleasant personality, be professional, be willing to take calculated risks, be a good role model, have strong financial resources, be consistent in expectations of the staff, and be consistent in the delivery of service.

A child-care business can easily be started in your home with just a few weeks of planning and a modest amount of start-up cash. A commercially located centre takes a greater investment of time, energy and money. The size and type of business you choose will depend on your start-up resources and goals for the future.

Many child-care providers are satisfied with a one-person operation in their home that generates a comfortable income while allowing them to do work they enjoy (and possibly even care for their own children). Others may start at home and eventually move to a commercial site as the business grows. Still others begin in commercial locations and are either content with one site or have plans to expand.

The Beginning Stages

Childrens-day-care

Start-up blocks

Start-up checklist

As you complete your startup efforts, use this checklist (and tailor it to your own needs) to make sure you’ve covered all your bases before you open your doors.

  1. Type of centre: Will you operate from your home or a commercial location?
  2. Licensing: What licenses are you required to have and from which agencies? What are the requirements, costs and lead times?
  3. Training and certification: What types of training and/or certification do you need?
  4. Market: What are the child-care needs of your community?
  5. Location: Choose a site that is appropriate and affordable.
  6. Legal requirements: Check on zoning and any other legal issues. (See regulations later on in the story)
  7. Financial issues: Estimate your start-up costs and identify the source(s) of your start-up funds.
  8. Health and safety issues: Plan for accident and illness prevention, and develop emergency procedures. See regulations later on in the story)
  9. Programs: Develop an appropriate schedule of activities for the children.
  10. Equipment: What do you need to adequately equip your centre, where will you get it, and how much will it cost?
  11. Insurance: What coverage do you need to adequately protect yourself and the children in your care?
  12. Staffing: If you plan to hire people, know the required staff-to-child ratios and develop your human resources policies.
  13. Links: What community and professional resources are available to you?

Related: The Complete Guide to Starting a Business in South Africa

Conducting Market Research

Prime candidates who need full-time child care are parents with infants to 5-year-olds. Parents with children over 5 are good prospects for after-school care programs. The market segments most likely to use child-care services are dual-income families and single-parent households in most income brackets.

A number of government programs help low-income families pay for child care so the adults can stay in the work force.

Within this very broad market is the narrower group of clients you’ll serve. Use market research to figure out who these people are and how you can best attract them to your center. Lois M. says the primary market at four of her six locations is parents who are upper-income working professionals; the other two centers serve a number of middle-income families as well as those being subsidised by public funds.

Janet H. says about half her clientele consists of dual-income families, and the other half is single mothers who receive government assistance as they work through programs designed to get them off welfare. The goal of market research is to identify your market, find out where it is, and develop a strategy to communicate with prospective customers in a way that will convince them to bring their children to you.

When Lois M. opened her first centre, her demographic research revealed that there were 9,000 children from infant to 5 years old within a 5-mile radius of the site; half the pre-school children in the area were in day care of some sort because their mothers (or both parents) worked; and the number of households in the area was expected to double within a decade. Contained in that 5-km radius were six child-care centres serving approximately 800 children.

Brenda B.’s research wasn’t as sophisticated. Living in a small town, she knows just about everyone and is well aware of the lack of child-care services.

“There’s such a need for day care,” she says. “I go through periods where I’ll get as many as five calls a week from parents needing care, and I don’t have room for them. I’ve had families on my waiting list for up to two years.”

Related: How to Research the Competitors in Your Area

What licenses do you need to start a pre-school?

Department of Social Development

Department of Social Development

Early Childhood Development Centre have to be registered with the Department of Social Development (DSD). This registration can be done through your local branch of the DSD.

The DSD suggest that you follow the following steps:

  • Complete an application form for registration as a place of care. You can get the application form on the web.

In order to apply you must submit a weekly menu and daily programme and then submit the following information:

  1. A building plan/hand drawn sketches of building
  2. A copy of constitution, signed and dated (only if you also require funding)
  3. Service/Business Plan (for application for funding
  4. Financial report of the past year (for funding purposes)
  5. Contract with the owner of the building (lease – for funding purposes)

Once the documentation is approved, you will have to undergo an assessment from the Local Authority on structural and health requirements

What types of child-care services can be offered

Before you open your doors to the first child, you should decide on the services you’ll provide and the policies that will guide your operation. To simply say you’re going to “take care of children” is woefully inadequate.

  • How many children?
  • What ages?
  • What hours?
  • Will you provide food or ask their parents to?
  • What activities will you offer?
  • What sort of price and payment policies will you have?
  • And the list goes on.

Your first step is to check with the appropriate regulatory agencies, which in South Africa is your local municipality and the local division of the Health Department. They will explain to you what’s involved in providing particular services.

For example, each province has its own guidelines for the maximum number of children and maximum number in each age group in a family child-care facility. Municipalities in various regions also have guidelines regarding caregivers. There will likely be other requirements and restrictions, depending on the type of facility you run.

Decide what services to offer based on your own preferences and what your market research says your community needs. Your choices include:

  1. Full-time care during traditional weekday hours
  2. After-school care
  3. Non-traditional hours (very early mornings, evenings, overnight care, weekdays and/or weekends)
  4. Drop-in or on-demand care, either during traditional or non-traditional hours
  5. Part-time care
  6. Parents’ night out (weekend evening care)
  7. Age-based care

Location

child-education

This is how you can choose your location to start your business

How to find the right location for a child-care business?

If you’re going to open a center on a commercial site, it makes sense to locate your facility close to your target market. Some parents may prefer a center close to home; others may choose a center close to their workplace. In the latter case, parents get to enjoy more time with their children during their morning and evening commutes, as well as the opportunity to spend time with them during the course of the day, perhaps for lunch or special programs.

Some site suggestions to consider include:

  1. A facility within or adjacent to a residential neighbourhood or near a school
  2. A facility in a shopping centre where parents with children are likely to pass by
  3. Sharing a facility with other community organisations
  4. Office and planned light-industrial parks with a sizable work force.

Opening a child-care centre at home

If you’re going to open a child-care centre at home, discuss your plans with family members and neighbours before you open. Younger children may resent other children coming into your home and changing their lifestyle.

Older children − especially teenagers who will need to be told what’s expected of them and what they can expect as your business gets off the ground. Spouses may not completely understand the time commitment involved in this business, so talk about things in detail well in advance of bringing the first client in.

You may find that your extended family and friends don’t really understand what’s involved in a professional child-care business and may think that, since you’re at home during the day, you’re “not really working” or you’re “just baby-sitting.”

Talk to your neighbours about the impact your business will have on them in terms of traffic (as parents drop off and pick up their children) and noise (think about the decibel levels five or six children can generate when playing). Let them know what steps you’ll take to keep any irritation or inconvenience to a minimum, and reassure them that they should feel free to contact you with any concerns or questions.

Some family child-care centre operators have certain rooms of their homes designated for their business; others use their entire homes. Your decision will be based on your state guidelines and personal preferences.

Brenda B. has a playroom for the children, but they are not restricted to that area; she says she pretty much uses her entire house and her large, fenced backyard for her business. Sherri Ax’s house in Durban has a living room that serves as the primary child-care area.

The Funds

funding-a-business

How much cash is needed to start a child care business

So what do you need in the way of cash and available credit to open your doors? Depending on what you already own, the services you want to offer and whether you’ll be home-based or in a commercial location, that number could range from a few hundred to tens of thousands of Rands.

As you consider your own situation, don’t pull a startup number out of the air; use your business plan to calculate how much you need to start your ideal operation, and then figure out how much you have. If you have all the cash you need, you’re very fortunate. If you don’t, you need to start playing with the numbers and deciding what you can do without.

Start-up costs can be low

Many of the child-care entrepreneurs we talked with used their own personal savings and equipment they already owned to start their businesses. Because the startup costs for a family child-care business are relatively low, you’ll find traditional financing difficult to obtain − banks and other lenders would much rather lend amounts much larger than you’ll need and are likely to be able to qualify for. A commercially located centre will take a more substantial investment and would likely qualify for a bank loan.

Brenda B. estimates that she initially spent R3000 to R4000 on equipment for her family child-care centre. She shopped at second hand shops and accepted donations of used toys and other items from friends and acquaintances.

Janet H. spent considerably more – about R40 000 – to set up her family child-care centre because she remodeled her garage to serve as the primary room for her business as well as added a bathroom for the children. When she opened her first commercial location, she used a combination of personal savings and credit cards to pay the expenses. By the time she opened her second location, she was able to qualify for a commercial loan.

Lois M. took out a second bond on her home to get the R105 000 she needed to adequately equip her commercial centre when she opened. Yvette B. in Miami, put R250 000 of personal savings into her children’s transportation service. Deborah B.’s start-up costs Johannesburg, were in the range of R40 000 to R50 000, which she funded primarily with personal credit cards.

As you’re putting together your financial plan, consider these sources of startup funds:

  • Your own resources. Do a thorough inventory of your assets. People generally have more assets than they immediately realise. This could include savings accounts, equity in property, insurance policies, unit trusts, and other investments. You may opt to sell assets for cash or use them as collateral for a loan. Take a
  • Look, too, at your personal line of credit. most of the equipment you’ll need is available through retail stores that accept credit cards.
  • Friends and family. The next step after gathering your own resources is to approach friends and relatives who believe in you and want to help you succeed. Be cautious with these arrangements; no matter how close you are, present yourself professionally, put everything in writing, and be sure the individuals you approach can afford to take the risk of investing in your business.
  • Partners. Though most family child-care centres are owned by just one person, you may want to consider using the “strength in numbers” principle and look around for someone to team up with you in your venture. You may choose someone who has financial resources and wants to work side by side with you in the business. Or you may find someone who has money to invest but no interest in doing the actual work. Be sure to create a written partnership agreement that clearly defines your respective responsibilities and obligations.

Government programmes

Take advantage of provincial and national government grants and funding programs designed to support small businesses. Women, minorities should check out niche financing possibilities designed to help these groups get into business.

Related: Need to Fund Your Business? Here’s What GPF is Looking For

Regulations, legal and licences

legal-business-documents

What are the regulations in South Africa concerning child-care businesses?

You have to register with the local municipality and apply for a health permit. Contact the Department of Health who will refer you to the correct area that you are zoned for and provide. Once you have selected a venue you have to register with the local municipality who in turn follows the regulations laid down by the Department of Social Development in accordance with the Childcare Act, 1983 ( Act No 74 of 1983).

When approving an application for registration, the Council can impose further conditions and restrictions as it sees fit. Once the application for registration has been approved, the Council will issue a Certificate which will:

  • State the name of the person to whom it is issued
  • Describe the premises in respect of which the application was approved
  • Will specify any conditions or restrictions which it may have imposed
  • Will state the period for which the premises will be registered.

Health Permit

The crèche or crèche-cum-nursery school has to comply with health by-laws to the to the satisfaction of the Medical Officer of Health who issues an Environmental Health Permit which every day centre or crèche should have. Setting up a crèche or day care centre regulations state that there should be:

Office, staff room and sick-bay

If there are more than 30 children are cared for on the premises, provision should be made for a separate office large enough to be divided into a sick bay to accommodate at least two children, as well as a staff room. These can be combined

Indoor Play Area

  • There must be an indoor play area covering a minimum floor space of 1,8m² per child to be used for play, meals and rest.
  • Cots and mattresses utilised for sleeping purposes by children must be arranged so that there shall be a minimum of 50cm space between the cots or mattresses.

Kitchen

  • The kitchen must have suitable cooking and washing facilities. Kitchen has to be separate from the play area and not be accessible to the play area or the children
  • There must be adequate natural lighting and ventilation
  • Wall surfaces should have a smooth finish and should be painted with a washable paint

Sanitary facilities

There must be one toilet and one hand washing facility for every 20 or less children under 5 years of age, irrespective of sex.

  • Or one toilet and hand washing facility for every 20 or less children above the age of 5 years, separate for each sex.
  • Separate toilet facilities must be provided for the staff as set out in the National Building Regulations.
  • There must be a supply of hot and cold running potable water at the wash-hand basins, or if no running water is available, a minimum of 25 litres of potable water, stored in a hygienically clean container.
  • If potties are used they must be emptied, cleaned and disinfected with a disinfectant immediately after being used and stored in a suitable place

Outdoor play area

If you have an outdoor play area it must provide at least 2 m² per child. The play area must have shady areas or other safe surfaces, be fenced / walled and have approved lockable or child-proof gates and should be free of excavations and dangerous steps and levels.

General

The crèche must keep a health register.

What licences are required and what legal, health and safety steps that must be taken?

A safe playground is crucial

Operating a safe playground for children to enjoy means that you have to follow the regulations as stipulated by the local council. You must also take advice from your insurer and your lawyer.

Insurance cover

It is important to buy liability insurance, including accident and equipment liability. Be sure to get a detailed list of insurer’s requirements and follow those to the letter. When purchasing play structures, make sure that they include warranties.

Comply with local council

Once the playground is built, you will have to comply with health by-laws to the satisfaction of the Medical Officer of Health who issues an Environmental Health Permit for the playground. You will have to undergo an assessment from the Local Authority on structural requirements before you can open the business.

Health and safety bylaws apply

In terms of the playground, the business has to comply with health by-laws to the satisfaction of the Medical Officer of Health who issues an Environmental Health Permit for the play area. You will have to undergo an assessment from the Local Authority on structural requirements before you can open the business. Contact the DoH and request the details of the local authority in your area

Getting your own licences is difficult

If the business is an independent operation, it’s harder. Your first step is to check with the appropriate regulatory agencies, which in South Africa is your local municipality and the Department of Health. Each municipal area has different by-laws, which is why it is so difficult to be specific in terms of licence requirements. The local council will explain to you which licences are required in providing particular services.

Food and liquor compliance

To serve food, a Certificate of Compliance for Food Preparation is required. If you sell any form of alcoholic beverage, you have to apply for a liquor licence.

Get legal advice

Consider consulting an attorney to ensure that you have all the correct licences. Browse through the Entrepreneur legal directory for options.

Pricing System

How to set prices and receive payments for a child care business?

The fees you charge will provide the financial base for your company and your income. They need to be competitive in your market, reasonable and affordable for the parents, and also fair to you. You need to consider a variety of issues, including your costs, the profit you want to make, the going rates in your area and what the families you’re targeting can afford. Setting your rates, explaining–and often justifying–them to parents and then collecting the money are all part of being in the child-care business.

Since you’ll be offering a carefully planned curriculum that is far more than a mere baby-sitting service, you are justified in establishing a fee structure similar in design to a private school. A one-time enrolment charge of half a week’s tuition will hardly raise an eyebrow, but it will compensate you for the cost in time, paperwork and special attention each entrant needs.

Calculating how much to charge for space in your centre will be based primarily on three variables:

  • Labour and materials (or supplies)
  • Overhead
  • Profit

 Limited intake

A fourth factor uncommon to most businesses but significant for a child-care centre the limit to the number of children you can accommodate. In most fields, if your business grows, you just keep hiring employees to serve the increasing number of customers. But in child care, municipal by-laws and practicality limit the number of children you can accept, putting a lid on the income potential of your business. To overcome this, successful child-care centre operators often open more locations in nearby areas to increase their client base and income.

Forms of Payment

You’ll receive payments by check and cash, and you may also want to set up a merchant account so you can accept credit cards or electronic transfers. Check with your bank or the different credit card companies for information on accepting credit cards. Many child-care and transportation service providers find that automatically debiting parents’ credit cards is the easiest way to obtain payment. “A debt order every month is the easiest way to get your money,” says Yvette B. “There are discount fees involved, but its well worth it.”

In most parts of South Africa, the demand for quality child care is so high that marketing your business will be relatively easy. In fact, many of the providers we talked to for this story − especially the home-based centres − do little or no marketing because they’re established, with strong reputations and waiting lists.

But every business needs a marketing plan, and yours is no exception. All your marketing materials should be professional and letter-perfect. Consider hiring a graphic designer and/or professional writer to help you with your marketing package. If they have children, you may be able to negotiate their fees in barter.

Keep these questions in mind as you form your marketing plan:

  • Who are your potential customers?
  • How many of them are there?
  • Where are they located?
  • What are they currently doing for child care?
  • Can you offer them anything they’re not getting now?
  • How can you persuade them to bring their children to you?
  • Exactly what services do you offer?
  • How do you compare with your competitors?
  • What kind of image do you want to project?

The goal of your marketing plan should be to convey your existence and the quality of your service to prospective customers, ideally using a multifaceted approach. The child-care center operators we talked with used a variety of marketing methods, from simple word-of-mouth to more sophisticated techniques.

Smart Tip

Ask new clients how they found out about you. Make a note of their answers and what kinds of businesses they represent (how many children they could potentially refer to your business). This will let you know how well your various marketing efforts are working. You can then decide to increase certain programs and eliminate those that aren’t working.

Related: How to Set the Prices for Your Child Services Business

Registration

How many children can a day-care centre accommodate before registering the business?

If there are five children or less you do not need to register the business. However, once there are six or more children you have to register.

When should a day-care centre be registered?

“You only need to register a day-care centre if there are six or more children,” says community development officer, Tinyiko Shibambu at the Department of Social Development in Johannesburg. “First you have to register the business as an NPO (Non Profit Organisation). Once you have a NPO certificate, then you can register the day-care centre with the Department of Social Development,” advises Shibambu. Contact the Department of Social Development for details.

Procedure to register an NPO

There is a specific registration process to follow in order to register an NPO

In a crèche scenario, how many caregivers should there be for the number of children in a class?

According to the Department of Social Welfare, to operate a basic crèche you must have a minimum of three staff members per class. In South African childcare centres, the staff to child ratio for 0-2-year-olds in an ideal situation is one caregiver to every five children, 1:5. For 2-3-year-olds, the ratio is 1:10. However, according to the Department of Social Welfare, to operate a basic crèche you must have a minimum of three staff members per class and you can employ more if the business can afford it. However, it is best to contact the municipal office in your area and check the regulations as each municipality has different regulations

Management

What goes into effectively managing a child-care business

The high rate of attrition in the child-care business is driven in large part by the fact that many caregivers focus almost exclusively on nurturing and caring for the children in their charge, and neglect the financial and management sides of their operations. But whether your goal is a small, family child-care centre or to build a chain of commercial locations, you must deal with administration and management issues if your business is going to survive. If you plan ahead, that won’t be hard.

Set up your financial record-keeping system

From the outset in a way that will provide you with the information you need to monitor your profitability and handle your tax payments to SARS. You may want to hire a consultant or an accountant who specializes in small businesses to help you at first; this small investment could save you a substantial amount of time and money in the long run.

Spend time marketing and doing admin

Expect to spend a significant amount of time on management, marketing and administration. If you have employees, they need to be trained and supervised. Although the demand for child care is high, parents won’t be able to find you if you don’t market your service.

And keeping up with administrative details–paying accounts, buying supplies, doing budgets and forecasts, meeting ongoing licensing requirements, facility maintenance, etc.− is a never-ending process.

Choose staff very carefully

The staff that you employ must be children-friendly. Conduct thorough background checks on all potential staff.

Ready to Take the Next Step?

You will need to create a business plan to get you going.

Here is a Free Sample Business Plan

Capital is essential to starting up your business. You can self fund, or alternatively seek outside funding to assist you in starting up your business.

Here are New Ways SMEs Can Find Funding.

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